Podcast Summary
Potential tax reform under Trump could benefit small cap stocks: 55% of 750 US stocks with high tax rates are small caps, industries like banking and energy may benefit from less regulation
The upcoming presidency of Donald Trump could potentially lead to corporate tax reform, which could benefit small cap stocks. According to Andy Cross from Motley Fool Hidden Gems, there are 750 stocks traded on the US markets with tax rates higher than 35%, and 55% of those are small cap stocks. Industries that may benefit from less regulation, such as banks and energy, could also see positive gains. Listen to the Think Fast, Talk Smart podcast for more tips on communication skills and stay tuned to Motley Fool Money for more stock market insights.
Campaign Promises and Investing: Proceed with Caution: Investors should approach campaign promises with caution and consider the long-term implications. Large cap companies with significant cash overseas could benefit from potential tax reforms, but be wary of penny stocks in the marijuana industry and ongoing challenges for certain companies like ESPN.
While campaign promises can provide opportunities for certain industries, it's crucial to approach investments with caution and consider the long-term implications. For instance, large cap companies with significant cash overseas could benefit from potential tax reforms, leading to increased buybacks, dividends, and domestic investments. However, investors should be wary of penny stocks in the marijuana industry due to financing challenges and the potential for larger corporations to dominate the market. Additionally, Disney's recent earnings report highlights the ongoing challenges for ESPN, but the company's CEO, Bob Iger, remains optimistic about its future. Overall, it's essential to maintain a long-term perspective and carefully evaluate the potential risks and rewards of various investment opportunities.
Disney's ESPN adapts to new distribution landscape: Disney invests in BAM Tech, plans for ESPN on-demand, and explores potential spin-off as ESPN shifts from traditional cable to over-the-top and skinny bundles. Macy's sees stock increase due to potential value of real estate holdings, estimated at $21B, with deals and potential sales to unlock this value.
Disney is navigating a complex new distribution landscape for ESPN, moving beyond traditional cable models to over-the-top and skinny bundles. This shift, while potentially reducing operating profits, opens up a larger market opportunity. Disney's investment in BAM Tech and plans for an ESPN on-demand, personalized service illustrate their efforts to adapt. Additionally, speculation about a potential spin-off of ESPN from Disney or vice versa has emerged due to the changing economics. Meanwhile, Macy's has seen a 10% stock increase despite lackluster Q3 earnings. The optimism stems from the potential value of the company's real estate holdings, estimated at $21 billion by activist investor Starboard Value. Macy's has announced deals with Brookfield Asset Management to develop 50 locations and the potential sale of stores in San Francisco, Portland, and Brooklyn to unlock this value.
Macy's Cautious About Spinning Off Real Estate Assets, Shake Shack Reports Impressive Earnings: Macy's is being cautious about spinning off its real estate assets and is optimistic about the holiday quarter. Shake Shack reported impressive 3rd quarter earnings and raised guidance for the full year, but its high restaurant valuations may not justify the current stock price.
While some companies, like NVIDIA, are experiencing strong earnings and growth in their industries, others, like the department stores, are continuing to struggle. Macy's is taking a cautious approach to spinning off its real estate assets and is optimistic about the holiday quarter, but the proof will be in the results. Shake Shack, on the other hand, has reported impressive 3rd quarter earnings with higher-than-expected profits and revenue, and raised guidance for the full year. However, the high valuation of each Shake Shack restaurant may not justify the current stock price. The holiday quarter will be crucial for Macy's to show improvement, while NVIDIA continues to make strides in gaming, data centers, and artificial intelligence.
Investing in the Restaurant Sector: Chipotle vs Shake Shack: Investors should carefully weigh the potential risks and rewards of investing in Chipotle or Shake Shack, considering the larger market opportunity for Chipotle and potential challenges in the restaurant sector.
While Shake Shack and Chipotle have different store valuations, the larger market opportunity for Chipotle with its expansion plans outweighs Shake Shack's. However, investors need to carefully consider the value they're getting for their investment. The restaurant sector as a whole has faced challenges with potential regulatory changes and rising food and labor costs. CVS Health had a good quarter but faced a significant blow when Walgreens signed a deal to take over a large portion of their prescription business, causing them to lower their guidance. Priceline had a strong quarter with impressive revenue growth, but their acquisition of OpenTable may have been overpriced, leading to a write-down. TripAdvisor's stock took a hit as the transition to InstaBooking is taking longer than expected. Overall, investors need to carefully consider the value and potential risks of their investments in the current market conditions.
TripAdvisor's investment taking longer than expected, Nordstrom's Q3 profits impress despite challenges: Despite longer-than-anticipated monetization for TripAdvisor and challenges for Nordstrom, their solid financials and strategic investments suggest long-term success
TripAdvisor's investment in its business in 2017 is expected to take longer than anticipated to monetize, but the company's strong user base and partnership with Priceline suggest long-term success. Elsewhere, Nordstrom reported impressive Q3 profits, with strong growth in its Rack division, but a write-down of its Trunk Club acquisition. The market reacted negatively to the election results in the US, leading to sell-offs in Japan and Hong Kong. Despite this, Nordstrom's stock remains attractive due to its solid financials and raised guidance. Overall, both companies are making strategic investments and facing challenges, but their fundamentals remain strong.
Markets' resilience during unexpected events: Despite initial market volatility, maintaining a diversified portfolio is crucial for long-term investment success, as markets have a way of coping with unexpected events.
The unexpected election of Donald Trump as the President of the United States in 2016 caused initial shock and panic in global markets, with many investors selling their shares and piling into safe-haven assets like gold. However, the markets quickly rebounded, and many investors, including the speaker, found that their portfolios were not significantly impacted by the election results. Companies like Unilever and tobacco firms continued to perform well regardless of who was in the White House. The speaker's experience during the Brexit vote and the US election highlighted the resilience of markets and the importance of maintaining a diversified portfolio. Despite initial concerns, the markets have a way of coping with unexpected events and investors should remain calm and focused on their long-term investment strategies.
Stay Calm and Buy During Market Volatility: Investors should remain calm during market fluctuations and view potential dips as opportunities to buy rather than reasons to sell. Emerging markets, particularly in Southeast Asia, have historically shown resilience and will continue to adapt and find new customers despite trade barriers.
Investors should remain calm during market volatility and view potential dips as buying opportunities rather than reasons to sell. The speaker also highlighted the resilience of emerging markets, using historical examples to illustrate how they adapt to changing economic conditions. The speaker expressed optimism that even if there are trade barriers put in place, emerging markets in Southeast Asia will find new customers and continue to thrive. Lastly, the speaker shared a personal connection to the financial industry, having been a bookmaker before becoming a financial commentator. When seeing large payouts for long shot bets on events like the Trump presidency and Brexit, the speaker expressed a mix of happiness for no longer being in that line of work and a sense of solidarity with his former colleagues.
Businesses can adapt to political events: Bookmakers don't care who wins, and businesses can survive political events. Wayfair's model requires constant spending, but repeat customers lead to profitability.
From a business perspective, the outcome of political events, such as a Trump presidency or Brexit, may not significantly impact bookmakers or businesses in general, as they are constructed to ensure a profit. The speaker, Chris, emphasizes that bookmakers don't care who wins, and businesses have the ability to adapt and survive. He also mentions that if a particular event doesn't yield significant profits, there will always be another opportunity to make more money. Regarding Wayfair, the online home furnishings company, the takeaway is that the business model requires constant spending to acquire customers and build infrastructure, and the key to profitability lies in having repeat customers who don't require additional acquisition costs. Despite the losses, the trend is in the right direction, but it's a challenging business to set up and requires careful management.
The Future of Live Streaming Platforms and Winning Stocks: Live streaming platforms like Periscope and Facebook Live are transforming content consumption, with Twitter's network size and Periscope's early entry contributing to their success. Infrastructure plans and improving economic conditions benefit companies like Titan International and TransDigm, making them promising investments.
The future of live streaming platforms like Periscope and Facebook Live is bright, as more and more people consume content in this way. Both platforms have their strengths, with Twitter's network size and Periscope's early entry into the market contributing to its success. The media landscape is being reshaped by these platforms, along with others like Amazon, challenging traditional networks. In the business world, stocks like Titan International, which manufactures industrial tires and wheels, are benefiting from infrastructure plans and improving economic conditions. While it may take some time for these benefits to be reflected in the stock price, investors may see significant upside potential. For example, Titan International, a small cap stock, could have at least 40% upside left, while larger companies like Caterpillar could also be good plays in this sector. TransDigm, a provider of aerospace parts, is another winning stock from the Hidden Gems portfolio, which was founded when it was a sub-$1 billion company and is now worth over $14 billion. Investors should keep an eye on companies that stand to benefit from infrastructure spending and improving economic conditions.
Investing in TransDigm and Home Depot: Strong Options in Growing Markets: TransDigm, with 90% TransDigm-specific revenue and 60% aftermarket parts, is a strong player in the aerospace market. Home Depot, an Amazon-proof business, has grown earnings per share at 21% annually for 5 years and underperformed YTD but is a solid long-term investment, despite potential impact of rising interest rates on earnings.
TransDigm Group (TDG) is a strong investment option in the growing aerospace market, with 90% of their revenue coming from TransDigm-specific products and about 60% being aftermarket parts. TransDigm could also expand into creating quieter planes and more fuel-efficient parts. Home Depot (HD) is another solid investment, as it is an Amazon-proof business with a large market opportunity and a track record of growing earnings per share at an annualized rate of 21% over the last 5 years, despite only a 5% increase in top-line growth. The stock has underperformed year to date, but its long-term performance has been impressive for shareholders. However, potential investors should keep an eye on the impact of rising interest rates on Home Depot's earnings, as higher mortgage rates could affect homeowners' spending on home improvement projects.
